Professional Documents
Culture Documents
Net Debt
(in D/E Equity Beta Asset Beta
$ 000s)
D&B Shoe Company 125442 29.90% 2.68 2.27
Marina Wilderness -91559 -7.60% 1.94 2.03
General Shoe Corp 171835 32.20% 1.92 1.61
Kinsley Coulter Products 82236 49.70% 1.12 0.86
Victory Athletic 7653207 21.70% 0.97 0.86
Surfside Footwear 195540 34.30% 2.13 1.77
Alpine Company 300550 28.50% 1.27 1.08
Heartland Outdoor Footwear -97018 -6.70% 1.01 1.05
Templeton Athletic 169579 42.60% 0.98 0.78
Average 24.90% 1.37
WACC Calculation
Debt/Value 20%
Cost of Debt(Kd) 6%
Debt/Equity 25%
10 year US treasury (Risk Free Rate) 4.73%
Market Return (March 2007 US) 8.49%
Risk Premium 3.76%
Tax Rate 40%
Ba(beta asset) 1.37
Be(beta Equity) 1.57
Cost of Equity(Ke) 10.65%
WACC 9.24%
Mercury Athletic Footwear: Projected Performance
2007 2008 2009 2010 2011
Consolidated Revenue ($ in 000s) 479,329 489,028 532,137 570,319 597,717
Less Operating Expenses 423,837 427,333 465,110 498,535 522,522
Less Corporate Overhead 8,487 8,659 9,422 10,098 10,583
Consolidated Operating Inc 47,005 53,036 57,605 61,686 64,612
Liabilities
Accounts Payable 18,830 18,985 20,664 22,149 23,214
Accrued Expenses 22,778 22,966 24,996 26,792 28,081
Liabilities
Debt 0 0 0 0 0 0
Valuation
2006 2007 2008 2009 2010 2011
EBIT $ 42,299 $ 47,005 $ 53,036 $ 57,605
$ $ 61,686 64,612
EBIT(1-T) $ 25,379 $ 28,203 $ 31,822 $ 34,563
$ $ 37,012 38,767
Depreciation $ 9,506 $ 9,587 $ 9,781 $ 10,643
$ $ 11,406 11,954
CAPEX $ 11,983 $ 12,226 $ 13,303
$ $ 14,258 14,943
WC $ 104,117 $ 108,685 $ 111,333 $ 121,138
$ $ 129,825 136,059
Change in WC $ 4,568 $ 2,648 $ 9,805
$ $ 8,687 6,234
FCFF $ 21,239 $ 26,729 $ 22,098
$ $ 25,473 29,544
Terminal Value $ 487,758
Net FCF $ 21,239 $ 26,729 $ 22,098 $ 25,473 $ 517,302
Enterprise Value $409,233
Long-run growth 3%
Valuation using rearranged Balance Sheet
2006 2007 2008 2009 2010
2011
EBIT $ 42,299 $ 47,005 $ 53,036 $ 57,605 $ 61,686
64,612 $
EBIT(1-T) $ 25,379 $ 28,203 $ 31,822 $ 34,563 $ 37,012
38,767 $
NWC $ 104,117 $ 108,685 $ 111,333 $ 121,138 $129,825
136,059 $
Change in NWC $ 4,568 $ 2,648 $ 9,805 $ 8,687
6,234 $
NFA $ 32,618 $ 35,015 $ 37,460 $ 40,120 $ 42,972
45,961 $
Change in NFA $ 2,397 $ 2,445 $ 2,660 $ 2,852
2,989 $
NOA 77332 77332 77332 77332 77332
77332
Change in NOA 0 0 0 00
FCFF $ 21,238 $ 26,729 $ 22,098 $ 25,473
$ 29,544
Terminal Value $ 487,758
Net FCF $ 21,238 $ 26,729 $ 22,098 $ 25,473 $ 517,302
Enterprise Value $409,233
Long-run growth 3%